MPI: Earnings dropped sequentially

 Result Update

For QE31/12/2015, MPI's net profit dropped 30% q-o-q but rose 37% y-o-y to RM43 million. Profits dropped q-o-q due to lower revenue & forex differences. Revenue dropped q-o-q from RM387 million to RM380 million due to 1%-increase in revenue for USA but decline for Europe and Asia of 1% & 4% respectively.


Table: MPI's last 8 quarterly results


Chart 1: MPI's last 36 quarterly results 

Industrial Outlook

Semiconductor may have peaked in this cycle. This may explain the pullback in MPI's latest quarterly revenue- despite the weakening of MYR vis-a-vis USD.


Chart 2: SOX's weekly chart as at Jan 28 2016 (Source: Stockcharts.com)

Valuation

MPI (closed at RM8.66 yesterday) is now trading at a trailing PER of 11.4 times (based on last 4 quarters' EPS of 76 sen). At this PE multiple, MPI is deemed fairly attractive.

Technical Outlook

MPI failed to surpass its strong horizontal resistance at RM10.00. This led to a sharp correction over the past 4 weeks.

 
Chart 3: MPI's monthly chart as at Jan 28 2016 (Source: ShareInvestor.com)

On weakness, MPI may find support at the horizontal line at RM7.25 or the uptrend line at RM7.00.
 
   
Chart 4: MPI's weekly chart as at Nov 17, 2015 (Source: ShareInvestor.com)

Conclusion

Despite the sharp correction in the past 4 weeks, MPI's long-term technical outlook remains positive. Thus it still deserves to be rated a HOLD. However, its upside may be limited as its valuation is no longer cheap. In addition, the concern going forward is whether the pullback in SOX will signal the end of the current up-cycle for semiconductor. If so, we may see further weak earnings ahead.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, MPI.